HSBC to Standard Chartered Drop as Moody’s Warns on Cyprus

The HSBC Holdings Plc logo is displayed on top of the company's headquarters in Hong Kong. HSBC’s gross on-balance sheet exposure to Cyprus was $0.3 billion as of the end of 2012, consisting primarily of loans to other financial institutions and companies, the London-based lender said in its latest annual report. Photographer: Jerome Favre/Bloomberg

March 18 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest
bank by assets, and Standard Chartered Plc fell in Hong Kong
trading after Moody’s Investors Service said the turmoil in
Cyprus may have negative implications for European bank ratings.

European finance ministers reached an unprecedented
agreement on March 16 forcing depositors in Cypriot banks to
share in the cost of the latest euro-zone bailout. Moody’s said
the decision is negative for depositors in Europe and marks a
significant step toward limiting systemic support for bank
creditors in the region.

“From the social planning point of view and the idea of
keeping depositor confidence in general, this is a terrible
precedent to set,” said Jim Antos, a Hong Kong-based analyst at
Mizuho Securities Asia Ltd. “People in Europe are probably
going to think hard about how much money they should put in a
tin can and bury in the back yard.”

Cypriot President Nicos Anastasiades, who bowed to demands
by euro-area finance ministers to raise 5.8 billion euros ($7.5
billion) by taking a piece of every bank account in Cyprus,
appealed to the country’s lawmakers to ratify the levy today.

Deposit Volatility

“It is reasonable to expect that the deposit volatility in
stressed sovereigns could rise,” Goldman Sachs Group Inc.
analysts led by Jernej Omahen wrote in a note to investors.
Still, any response from depositors in Italy, Ireland, Spain and
Portugal will probably be limited as their “perception of banks
has improved,” the analysts wrote.

Gareth Hewett, a Hong Kong-based spokesman for HSBC,
declined to comment on its Cyprus operations. Standard Chartered
has no presence in the country and no direct sovereign exposure
to Greece, Ireland, Italy, Portugal and Spain, said Doris Fan, a
Hong Kong-based spokeswoman for the London-based bank.

HSBC’s gross on-balance sheet exposure to Cyprus was $0.3
billion as of the end of 2012, consisting primarily of loans to
other financial institutions and companies, the London-based
lender said in its latest annual report.

Moody’s said the support package for Cyprus reduces the
immediate risk of a restructuring of its sovereign debt.
European banks had $39 billion in claims in Cyprus as of Sept.
30, according to Bank for International Settlements data.

“While raising the risk of deposit flight out of
peripheral banking systems, the agreement reflects euro area
policymakers’ desire to avoid sovereign defaults in addition to
Greece’s,” the ratings company wrote in its credit outlook.